The CYBG PLC/IDR UNRESTR (ASX: CYB) share price is staging a tentative bounce from yesterday's massive price plunge as brokers cast their verdict on the UK-based bank.
The CYB share price firmed 0.4% to $3.61 but its still down more than 19% since it released its disappointing FY18 results yesterday.
CYBG, which owns the Clydesdale Bank, had been the best performing bank stock in 2018 before Brexit fears rattled the market in October and had outperformed peers like the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, Australia and New Zealand Banking Group (ASX: ANZ) share price and National Australia Bank Ltd. (ASX: NAB) share price.
But CYBG is now the worst performer in the sector and it will probably remain at the bottom of the leader board for the rest of the calendar year.
This is despite most experts thinking that the stock has been oversold. A sombre outlook for FY19 and FY20 due to Brexit and a big drop in its net interest margin (NIM).
Here's what the brokers are saying:
Morgans: CYB has reported FY18 underlying NPAT of £269m, 3.5% better than our expectation. However, this beat was assisted by a low effective tax rate in 2H18. FY18 underlying pre-tax profit missed our forecast by 3.4%, largely due to net interest income being softer than expected. With negative momentum in the VM [Virgin Money] margin, uncertainty about the extent of excess CET1 capital, increased Brexit uncertainty, and potential for FRTBL group legal action, we have reduced our target price to £2.50 (previously £3.50). That works out to a price target of $4.39 and Morgans is sticking with its "add" recommendation on the stock.
Macquarie Group Ltd (ASX: MQG): The FY18 result was overshadowed by the near-term margin pressures from the Virgin Money acquisition. While we believe over the medium term CYBG should be able to improve its funding mix and achieve a sustainable return on tangible equity of ~12%, the absence of medium-term targets is likely to result in a near-term uncertainty and information vacuum, which will not be conducive for the potential share price re-rating. In the longer term, we continue to see value in CYBG and maintain our Outperform recommendation. Macquarie has a $5.50 price target on the stock.
Shaw and Partners: The best is behind CYBG. The promise was captivating and the harshness of the reality is equally so. 10% earnings downgrade. The share price is now so low that the recommendation is upgraded to "hold" from "sell". The broker has a $3.70 price target on CYBG.
